Do Obamacare exchanges offer enough choice?

In some regions, Americans have only one insurance option

By

JenWieczner

Depending on where they live, Americans who already buy their own health insurance may find that the new health exchanges offer fewer plans and doctors to choose from.

The Affordable Care Act opens up a world of health care possibilities for some, particularly those previously unable to get coverage due to pre-existing conditions. But the law’s signature marketplaces where people can shop for individual insurance are more limited than the current market in many parts of the country. There are 13% fewer insurance carriers participating in the health-insurance exchanges than participated in the individual insurance market in 2012, according to an analysis by McKinsey & Company, the consulting firm. Excluding the 63 insurance carriers offering commercial coverage for the first time—many of which formerly just served Medicaid—the exchange marketplace is 35% smaller than the 2012 market.

Government health officials have credited “healthy competition” on the marketplaces with keeping premiums low, saying consumers will have a choice of 53 health plans on average, with 95% of people able to choose between more than one insurance company. And there are some indications that exchange competition is working to reduce prices, as carriers in some states such as Oregon revised their rates lower after seeing what rival companies planned to charge.

But in some parts of the country, consumers will have far fewer plans to choose from—and pay hundreds of dollars more in places where a single insurer monopolizes the region. Americans in 23 states will find a smaller selection of carriers on the exchange than in the pre-ACA market, according to McKinsey. About 5% won't have a choice at all, because only one insurance company is participating in their area. This includes everyone in New Hampshire and West Virginia (where five insurance companies previously competed), most of Alabama, as well as parts of Arkansas, Florida, Georgia, Indiana, Mississippi, North Carolina, Tennessee and Wisconsin. While most of the people served by a single carrier will still have at least 13 and as many as 30 health plans to pick from, some people will have only seven options or fewer.

The effect of competition, or lack thereof, is particularly evident in places where there is only a single insurer selling on the exchange, says John Larew, principal at Oliver Wyman who leads the consultancy’s health reform office. “There does seem to be some impact of the intensity of competition: Where a lot of carriers were attracted to exchanges, you tend to see more competitive price points,” he says.

Reuters

Because health insurance is designed to cover medical care near where you live, the choice of plans and how much they cost can vary greatly even between zip codes. In Georgia, for example, where four of the nine insurance carriers abstained from the exchange, the lowest premiums are in the most competitive markets, and the highest prices are where one insurer dominates, according to a MarketWatch analysis of government data. The cheapest bronze plans for a 50-year-old cost about $280 where five insurers compete, but in the 30 counties monopolized by Blue Cross and Blue Shield of Georgia, they cost $477 or $520 (or up to 86% more). By contrast, Blue Cross and Blue Shield of Georgia charges just $350 for the same plan in other parts of the state.

Blue Cross and Blue Shield of Georgia spokesman Bert Kelly says insurers had to file their rates before learning who their competitors would be and what they would charge, and it priced its plans based on the cost of health care in the region. The southwestern area of Georgia, where Blue Cross and Blue Shield of Georgia is the sole carrier, is a rural area with higher health care costs—which might be why other carriers chose not to participate there at all, Kelly says: “It’s not like we knew we would be the only one down there.”

Perhaps surprisingly, the prices in the two states where a single company monopolizes the exchange were slightly lower than states that have several—but not much. In New Hampshire, bronze plans for a 50-year-old will start at $317. In West Virginia, the lowest-cost bronze plan for a 50-year-old is $280 to $341 depending on where you live. Wyoming has two carriers competing on its exchange, but its rates are the most expensive nationally, with a 50-year-old paying at least $462 or $499.

To be sure, consumers can still shop for individual insurance outside of the exchange market, where there might be more choices (except in Vermont and Washington, D.C., where all plans will be sold on the marketplace). Many insurance carriers who skipped the exchanges are still competing in the regular market as they did previously, even in West Virginia and New Hampshire. But figuring out the options outside the exchanges can be difficult, as comparison websites and brokers often just present plans from companies that pay them commissions, rather than the full spectrum of choices. And people applying for federal insurance subsidies (available to households with income up to 400% of the federal poverty level) will be limited to options sold on the exchange.

In some of the less competitive markets including New Hampshire and Alabama, health officials and analysts point out that few carriers were participating there even before the health law, so competition hasn't been reduced. But some exchanges, including those in Delaware, Indiana, Mississippi, and North Carolina, lost more than half of the previously participating carriers; West Virginia’s exchange lost 80% of its market, while Wyoming’s exchange, the most expensive in the nation with just two insurers participating, lost more than 70% of the state’s seven carriers.

In those places, “obviously it is less choice,” says McKinsey director Paul Mango, who leads the firm’s health reform practice. “There are some states that have a lot more carriers than they used to, and some states that have a lot fewer carriers than they used to.” To limit the health care landscape further, nearly half of plans offered on the exchanges restrict their coverage to a narrower network of doctors, Mango says. People wishing to see certain physicians can check with them to find out which insurance plans they accept, or use ZocDoc.com, the appointment scheduling site that is also grading exchange health plans on the availability of doctors in their network. If just one company is offering health insurance in an area, experts say consumers there may still be able to find a plan from that carrier that covers their doctors—but not always. “In some cases, it’s going to be a perfect match. In other cases, they’re going to have to change providers,” says John Haslinger, vice president of ADP Strategic Advisory Services.

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